Bankruptcy Relief

Gawker Media is being sued by Hulk Hogan, and the case is helping to push the website into bankruptcy. This is an interesting case on a few levels, one of which is that it sheds light on how the bankruptcy auction process works. Below are a few key points that Gawker has emphasized regarding the process.

A Buyer Must be Found

In this way, a bankruptcy sale is not that different than a traditional sale or a merger. The company has to go out and look for an interested buyer to start the process off. They then have to get an offer from said buyer. In this case, Gawker has been offered around $90 million, and the buyer will take on some of the company's liabilities. There were six initial bidders, but this looks to be the direction Gawker is going.

The Auction Still Happens

One crucial thing to note is that the bid doesn't buy the company outright. It's called a "stalking horse" bid, and it establishes a base level of value for the company. Everything still has to go to bankruptcy court and an auction has to take place. That stalking horse bid could win, but it's not an outright purchase.

Things Beyond Price Can Be Considered

The amount of money that is offered for a company isn't the only thing that is looked at when figuring out which bid is the winner, at least not in every case. In Gawker's case, they are also going to consider the potential fit with the new company and the preservation of jobs after the Chapter 11 filing. They may also look at the assumption of liabilities. All of this will be taken along with how many millions are going to be paid.

Emerging from Bankruptcy

As this case shows, bankruptcy can be complicated, and it's important to know how the process works and what steps have to be taken. Many companies declare bankruptcy and emerge from the other side intact, so it doesn't mean a company is going to end, at least if it's done properly. To weather the storm, owners have to know how to proceed through the entire bankruptcy process.